Mitragyna Speciosa

This post was originally published on April 7, 2016 on the Jobs & Development blog of the World Bank Group

Across the globe, small businesses and entrepreneurs face a myriad of challenges including competition from large multinational retailers, a sluggish economy, and market limitations that come with being tied to brick and mortar stores in less-economically-advantaged areas. However, in recent years a quiet revolution has been brewing because of the development and growth of the ecommerce platform and the digital marketplace.

Barriers to accessing larger and more robust markets are receding and small businesses and entrepreneurs are beginning to leverage technology and global marketplace platforms to reach consumers in new ways. Platforms like eBay or Alibaba are allowing small businesses, and even micro businesses, to open with minimal start-up costs and compete in global markets, an opportunity traditionally open only to the massive global players that have dominated global commerce. What is perhaps most significant is that this ability to access global market opportunities is available to small and micro businesses in advanced AND emerging economies. This is transforming the traditional export growth model and providing new opportunities to small and micro businesses that were traditionally incapable of directly accessing global market opportunities.

In January, the eBay Public Policy Lab released the Small Online Business Growth Report: Towards an Inclusive Global Economy. The report provides trade and growth data across 18 countries for sellers with $10,000 or more in annual sales on the eBay marketplace (eBay-enabled SMEs). Our findings show that eBay-enabled SMEs, many of them micro in size, engage in exporting at unprecedented levels, and reach nearly every corner of the globe. As a result, they are growing faster than their overall national economies. This is true in advanced economies like the US, EU, Australia and Korea, but most striking, similar positive results are occurring in the developing countries, such as South Africa, Indonesia, Mexico and Columbia. This further bolsters the argument that the technology-enabled platform commerce model, which significantly reduces the cost of doing business, is a highly inclusive model of trade. For example, our research revealed:

• Among the full 18-country data set, half had 100% export rates, meaning every eBay-enabled SME exported in 2014.
• In more than three quarters of the countries reviewed, the majority of eBay-enabled SMEs sold to consumers on four or more continents.
• In all 18 countries, sellers that were eBay-enabled SMEs for the duration of the research period (2010-2014) experienced a growth rate in sales that outpaced their home country’s economic growth rate.

The Small Business Online Growth Report continues to report on a new model of SME exporting that has emerged in parallel to the SME Global Value Chain model. We have coined the term Global Empowerment Network to describe this new model by which small businesses are able to create a storefront presence online and compete in global markets through e-commerce platforms with vibrant customer bases. The Global Empowerment Network combines a set of services and conditions enabling SMEs to transcend borders, reach customers on a global scale, and facilitate business transactions. There are four key building blocks that fuel the Global Empowerment Network:

1. Connectivity to the global Internet at lost cost and without gatekeepers
2. Global platform-based marketing, marketplace and payment services
3. Efficient, modern and “connected” package-level logistics and delivery services
4. Legal, regulatory, and public policy framework supporting direct SME-to-consumer global commerce

Policy suggestions
Platform-enabled SMEs are a relatively new phenomenon on the global trade scene. To date, policies targeted specifically to facilitate the expansion of technology-enabled SME trade, which would promote more balanced growth and make trade more inclusive, have largely been absent from official trade policy forums. It is now time to elevate a new range of policies that will promote the uptake of this highly inclusive mode of global commerce.

The following general policy recommendations would enhance the ability of platform-enabled SMEs to access the global market regardless of where they are emerging as SME traders globally.

• Expand Access to the Internet. Promote the continued expansion of access to the open, global Internet, as well as global commerce platforms and intermediaries that connect entrepreneurs and technology-enabled SMEs with consumers globally.

• Increase Customs Import Duty and Tax Exemption Thresholds. Expanding de minimis thresholds promotes trade and economic opportunities for SMEs by reducing the time, cost, and uncertainty of moving the packages of technology-enabled SMEs across borders.

• Digital Single Windows. Interoperable Digital Single Window (IDSW) efforts between countries would promote greater regional SME commerce and would further reduce barriers at the border.

• Recognize Postal Systems as SME Trade Facilitators. Simplification, modernization, harmonization and integration of national postal services, as well as more robust cooperation with and treatment of private shippers, will promote greater and more broad-based SME commerce opportunities.

• Promote Balanced Internet Intermediary Policies. Trade agreements can be used to harmonize liability regimes in a manner that encourages countries to adopt policies that support SME-based commerce and opportunity.

• Open Trusted Trader Programs to Platform-Enabled SMEs. Cooperative risk assessment methodologies should be developed to better facilitate technology-enabled SME trade.

• Explore Flexible International Regulatory Cooperation Solutions. Policymakers should explore non-national legal instruments to promote consumer protection in a manner that welcomes SME traders into the global commerce regime side-by-side with established global companies.

Welcoming more small and micro businesses from across advanced and developing economies into the global market benefits consumers, offering them with more choice, and creates new opportunities for entrepreneurs looking to build and grow their business. Our data paints a brighter future for these small businesses, and demonstrate that ecommerce platforms contribute greatly to the goal of a more inclusive global economy.